Value added tax (VAT) is a transaction tax or rather an indirect tax on consumption, charged on the supply of taxable goods and services. Vat is levied on every taxable supply by a registered person. A taxable supply refers to any supply of goods or services in the course or furtherance of taxable activity. A taxable activity refers to any activity that is carried out continuously or regularly in Zimbabwe that involves the supply of goods or services for consideration.

In its 2023 Budget, Zimbabwe has returned its standard VAT rate to 15% to which was originally cut to 14.5% at the start of 2020 due to the need to assist households during the COVID-19 pandemic. At 15%, it remains marginally lower than other local countries which average around 16%. The increment took effect on the 1st of January 2023 precedent to section 17 of the finance (No. 2) Act, 2022 which was gazetted on the 30th of December 2022.

The net effect of returning the VAT rate at 15% impacts both on consumers and suppliers of good and services. An increase of VAT rates has the net effect of increasing or rather raising the consumer prices of goods and services in the market place with consumers in the lower income brackets feeling the effects the most. In addition, the increase in VAT rates will also likely cause ripple effects in the market prices of goods and services with consumers feeling the pinch as they will be looking to get more value from brands at a lesser cost.

On the side of suppliers, this means that firms will now supply the same amount of goods into the market provided that the market prices are increased by the amount of tax payment such that they receive the same revenue as before the increase of the Vat rate. In essence, the rising of VAT rates also translates to higher costs for businesses or suppliers of goods and services therefore reducing the consumers' disposable income in that people will have less money to spend on goods and services resulting in lower demand and sales revenues for suppliers of goods and services.

In conclusion, the return of VAT rate to 15% in Zimbabwe's 2023 budget is bound to have an impact on both consumers and suppliers with the increase in consumer prices of goods and services in the market place and higher costs for suppliers of goods and services.

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